Friday, September 04, 2015

2015 marks a general 36-year trend of broad-based wage
stagnation and rising inequality in our country, which has had real, adverse
effects on low- and middle-income households. Despite dramatic gains in
educational attainment, wages have failed to grow for those at the bottom (and
middle) over the last four decades.

The figure below shows the major sources of income for
non-elderly households in the bottom fifth of the income distribution from 1979
to 2011, using the CBO’s measure of comprehensive income. It shows that incomes
of the bottom fifth are increasingly dependent on ties to the workforce. Wages,
employer-provided benefits, and tax credits that are dependent on work (such as
the EITC) made up 68.3 percent of non-elderly bottom-fifth incomes in 2011,
compared with only 58.2 percent in 1979. While government in-kind benefits from
sources such as the Supplemental Nutrition Assistance Program (formerly food
stamps) and Medicaid increased from 13.2 percent of these bottom-fifth incomes
in 1979, to 19.5 percent in 2011, cash transfers such as welfare payments have
declined 9.2 percentage points (from 18.6 percent to 9.4 percent).

Despite what some policymakers and pundits might have us
believe, a significant share of poor people work. The figure below shows the
population of those in poverty segmented into various labor status categories.
The top bar shows that 35.2 percent of the poor between the ages of 18 and 64
in 2013 were considered not currently eligible to work because they are
retired, going to school, or disabled. The other 64.8 percent of working-age
poor are currently eligible to work. The second bar shows us that among these
currently-eligible workers, 62.6 percent are working and 44.3 percent are
working full-time. Of the working-age poor eligible for employment, 37.4
percent are not working—a share that includes the 3.3 million unemployed poor
people seeking a job.

If all wages had grown at the same rate as productivity
since 1979 (in other words, had economic gains been more widely shared with
low- and moderate-wage workers), 7.1 million fewer people would be poor and the
market-based non-elderly poverty rate would be 2.6 percentage points lower
today, or 13.5 percent. If we had also targeted full employment through Federal
Reserve policy, for instance, the non-elderly market-based poverty rate would
be 4.2 percentage points less and 11.2 million fewer people would be poor.